High-Frequency Substitution and the Measurement of Price Indexes

Feenstra, Robert C.; Shapiro, Matthew D.

doi:10.3386/w8176

Cited by 14 publications

(10 citation statements)

References 11 publications

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“…5 confirms what others have found before (Feenstra and Shapiro, 2003;Ivancic, 2007;de Haan, 2008a;Ivancic et al, 2009): weekly chaining of superlative indexes can lead to exceptionally large drift. For detergents we observe downward drift.…”

Section: Figuresupporting

confidence: 88%

“…The sign of the drift depends on the magnitude of the price decrease and the associated quantity shifts of all goods belonging to the product group, and on the periodicity of acquisition and consumption. 8 8 Feenstra and Shapiro (2003), using data on canned tuna, found that the weekly chained Törnqvist index had an upward drift: ''in periods when the prices are low, but there are no advertisements, the quantities are not high [. .…”

Section: The Problem Of Chain Driftmentioning

confidence: 99%

“…Still, sales cause considerable bouncing of monthly unit values and quantities. A trivial solution to the problem of drift is not to chain at all and use a direct index, as suggested by Feenstra and Shapiro (2003). This is problematic considering the small number of products that match over time.…”

Section: Introductionmentioning

confidence: 97%

See 2 more Smart Citations

Eliminating chain drift in price indexes based on scanner data

Haan¹,

Grient²

2011

Journal of Econometrics

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Section: Figuresupporting

confidence: 88%

Section: The Problem Of Chain Driftmentioning

confidence: 99%

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Eliminating chain drift in price indexes based on scanner data

Haan¹,

Grient²

2011

Journal of Econometrics

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“…Chained price indices allow for such substitution. However, Feenstra and Shapiro (2003) argue that one must consider substitution over time as well, because consumers can accumulate inventory in response to price promotions. They use scanner data on purchases by individuals to show that in the presence of intertemporal substitution effects, chained indices have a pronounced upward bias, whereas a fixed-base Laspeyres index does not.…”

Section: Intercategory Consumption Smoothingmentioning

confidence: 98%

Crisis and Consumption Smoothing

Dutt

Padmanabhan

2011

Marketing Science

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The dramatic impact of the current crisis on performance of businesses across sectors and economies has been headlining the business press for the past several months. Extant reconciliations of these patterns in the popular press rely on ad hoc reasoning. Using historical data on currency crisis episodes across the world, we show that the impact of the crisis on a firm's business is best understood by focusing on the impact of the crisis on the behavior of consumers. Our analyses show that consumer behavior in a crisis is characterized by consumption smoothing at various levels--intertemporal, intercategory, and intracategory. These behavioral adjustments result in significant reallocation of consumption expenditures. More importantly, the smoothing decisions because of a crisis are distinct and independent of the impact of changes in income and prices that accompany a crisis. Interestingly, there is marked variation in the patterns of consumption smoothing across different types of economies. Taken together, these results have important and interesting implications for managers, policy makers, and academics.consumer behavior, consumption smoothing, crisis, econometrics, marketing strategy

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“…First, sales are important for price indices. Just as price indices need to account for the fact that consumers can substitute across different goods, so too do price indices need to account for the fact that consumers can substitute across the same good at different points in time (Feenstra and Shapiro, 2003). Second, there is an extensive empirical literature on price flexibility (e.g., Klenow and Malin, 2011)—how often are prices adjusted and by how much?…”

Section: Introductionmentioning

confidence: 99%

An Equilibrium Search Model of Synchronized Sales*

Albrecht

Postel‐Vinay

Vroman

2013

Int Economic Review

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We demonstrate the existence of periodic nonstationary equilibria with self-generating cycles in a simple model of random search. Our results provide a theory of synchronized sales based on product market search by heterogeneous consumers. That is, our model explains how it can be optimal for all sellers to follow a repeated pattern of posting a high price for several periods and then posting a low price for one period.

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High-Frequency Substitution and the Measurement of Price Indexes

Cited by 14 publications

References 11 publications

Eliminating chain drift in price indexes based on scanner data

Eliminating chain drift in price indexes based on scanner data

Crisis and Consumption Smoothing

An Equilibrium Search Model of Synchronized Sales*

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